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Core banking tech developer Riby secures funding from Microtraction

Microtraction, a Nigeria-based investment firm offering “hassle-free funding for technology entrepreneurs” at the early stages of their ventures, has invested in local fintech firm Riby, which develops software for African cooperatives, trade groups and credit unions.

Riby was launched in 2016. Since then, over 100,000 loans at a $150 average have been originated to users on its platform by banking partners. The number of paid users has doubled in the last four months. Riby has over 20,000 groups registered with 10% onboard, and others on a waiting list. There are also six corporate partners at different engagement stages, which together are expected to bring 2.5 million new users in about a year.

Dayo Koleowo, principal investment officer at Microtraction, explains the decision: “Thousands of cooperatives have existed for decades in Nigeria/Africa, and as credit unions or rotating savings and credit associations (ROSCAs) in many other parts of the world. They continue to experience limited growth, fraud and slow service delivery because they manage their activities using paper and pen (90%), spreadsheets (9%) and custom cooperative banking platforms (1%) with very limited functionality.

“Coupled with worsening economic situations, the cooperatives need to become better managed, automated, transparent and connected to the digital banking ecosystem to be able to expand, improve their appeal to keep attracting members and get better access to cheap financing from larger financial institutions, banks and development finance agencies.”

Riby has built a cloud-based core banking application for cooperatives to automate the entire operations and financial activities from the group-admin-level up to individual members account management.

36% of savers in Nigeria use trade group savings collectors and cooperatives according to Efina Access to Financial Services, Koleowo says. At present, the “banked” cooperative market is about 10% of the banking industry in Nigeria, which is approximately $5.5 billion. “We believe this will be about $10 billion across Sub-Saharan Africa alone,” he says.

“On another hand, the unbanked are an added volume considering twice the number of the banked population are still unbanked in Nigeria alone and the unbanked have the largest volumes of cooperatives which serves as their own bank,” he continues.

“At Microtraction, our long-term mission is to accelerate Africa’s transition to a sustainable and developed economy. We do this by investing in entrepreneurs who leverage technology, capital and innovation to try and solve some of the largest problems on the continent.”

The company is keen to get involved in other start-ups in the sector. “If you are working on solving one of these problems, we should talk!” Koleowo says.

Microtraction invests $65,000 in two stages, starting with $15,000 for 7.5% equity stake. This is followed by an additional $50,000 convertible note at a $1 million valuation cap in companies that show significant progress after the initial investment.

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